The Pros and Cons of Minimum Wage

The ideas and viewpoints provided in Robert Reich’s article “The Morality of a $15 Minimum” may be the crux of our entire employment economic system and the struggles within. If I were an employer, I may be wondering if I should pay my employees the optional minimum wage. Let's take a look at the pros and cons of the optional minimum wage so that you can make an informed decision for your business. 

The Pros of the Optional Minimum Wage 

1. It attracts better workers. When you offer a higher wage, you are likely to attract workers who are more skilled and have more experience. This can save you money in the long run as you will not have to train new employees as often. 

2. Employee turnover decreases. When employees are happy with their wages, they are less likely to look for other jobs. This saves you money in the long run as you will not have to train new employees as often. 

3. It increases productivity. Employees who are paid fairly are more likely to be productive and work harder. This means that you will get more work done and save money on resources. 

4. It boosts morale. Employees who feel like they are being treated fairly are more likely to be motivated and work harder. This leads to a better work environment and increased productivity. 

5. It reduces stress levels. Employees who feel like they are being paid fairly are less likely to feel stressed about their job, which leads to a better work environment and increased productivity. 

6. It improves retention rates. Employees who feel like they are being paid fairly are less likely to look for other jobs, which saves you money in the long run as you will not have to train new employees as often. 

7. Employees are more likely to recommend your business to others. A good reputation is important for any business and paying your employees a fair wage is one way to ensure that your business has a good reputation. When your employees are happy, they are more likely to recommend your business to others, which can lead to increased profits.   

8. It’s the right thing to do!  If you believe that everyone deserves to be paid a fair wage for their work, then paying the optional minimum wage is the right thing to do!   

Cons of Raising the Minimum Wage    

There is no doubt that raising the minimum wage has its benefits, but there are also some downsides that employers should be aware of before making the decision to raise wages. Here are some of the potential cons of raising the minimum wage: 

1. It could lead to inflation. One of the potential risks of raising the minimum wage is that it could cause inflationary pressures in the economy. When wages go up, businesses may respond by increasing prices in order to maintain their profit margins.

2. It could lead to job loss. Another potential downside of raising the minimum wage is that it could lead to widespread job loss. Businesses may not be able or willing to absorb the increased labor costs associated with a higher minimum wage, so they may cut jobs in order to stay afloat.

3. It could widen income inequality. While raising the minimum wage would increase earnings for low-wage workers, it could also widen income inequality. Since businesses would likely pass on at least some of their increased labor costs associated with a higher minimum onto consumers through higher prices, consumers would face increases in costs for goods and services. 

4. It could reduce economic growth. One final potential downside of raising the minimum wage is that it could reduce economic growth. If businesses respond to a higher minimum wage by cutting jobs or reducing hours worked, this could lead to real reductions in economic activity and slow down overall economic growth.

  My opinion has not changed after reading Reich’s article. Knowledge helps to shape people ideas. Therefore, when we read something online and it introduces a new thought it may change our perspective. I do not participate in online arguments about any subject. I feel confident in my ability to take in information and make my own decision and I am rather particular about the sources that I get my information from. So much of what is available online is trash.

There is no easy answer when it comes down whether or not employers should pay their employees Optional Minimum Wage rates set by different states and or our nation. I do agree with Reich’s statement in his article, “So we’ve raised standards and lost such jobs. In effect, we’ve decided such jobs aren’t worth keeping.” Ultimately there are jobs that some of would rather not do, and others may settle for due to need based situations and these may be what keeps us diverse. In the long run, robots will begin to take over many of the minimum wage jobs and this will alleviate this fight but leave us with a new struggle. What do we do with unskilled workers? How will we move them from unskilled to skilled and can our economy handle that many skilled workers?

Works Cited

Reich, Robert. “The Morality of a $15 Minimum.” Monday, October 19, 2015. http://robertreich.org/post/131476708345

“What is the Minimum Wage?” (Nov. 2022) https://minimumwage.com/what-is-the-minimum-wage/

US Dept. of Labor. “Minimum Wage” ?” (Nov. 2022) https://www.dol.gov/general/topic/wages/minimumwage

How to Identify Important Payroll procedures and Pay Cycles

 Identify Important Payroll procedures and Pay Cycles 

1. EIN = employer documentation needed before any employees are hired 
2. FLSA = requires certain info in every employee file
3. US DOL = requires the following to be included in employee files
4. Full name as shown on the SSN card
5. Full address, with zip code
6. DOB if younger than 19
7. Sex and occupation type
8. Employee's workweek = time and day that the workweek begins
9. Hours = worked each day & worked each workweek
10. Employee's wages = basis on how they are paid
11. Hourly pay rate = regular rate
12. Straight-time earnings = total daily/weekly
13. Overtime = total workweek earnings
14. Additions & deductions = all taken or added to employee's wages
15. Pay period = total wages paid
16. Date of payment
17. Pay period covered by the payment

There is a wide range of questions that a company needs to ask itself prior to hiring employees. 

• How are new hires handled
• Employee files maintenance and security
• Employee termination and transfer procedures
• Government compliance as related to employee hiring and files record keeping
• Time and attendance tracking
• Employee record-keeping SOPs
• Where will mandatory posters be hung?

Payroll documentation regulations

• Protect employees
• Regulations keep employers in compliance with tax regulations
• Doc requirements provide an audit trail for government bodies
• Employee files are maintained by HR
• Employee info form is maintained by the payroll dept (some FLSA elements may not appear on the form)

New hire reporting ensures that new employees pay 

• Child support
• Garnishments

EEOC (Equal Employment Opportunity Commission)

• Accurate and correctly maintained payroll records are important
• They reflect the treatment of the employees
• These records are private (i.e. not available to the employee) except in Illinois

Pay cycles/pay periods = how often should a company pay its employees?

• Daily payroll = usually related to daily labor often 1099.365/366 pay periods in a year.
• Weekly: 5-day workweek, usually paid every Friday (grocery/construction/prof offices). 52 pay periods in a year.
• Biweekly: 2-week period (26/sometimes 27 pay periods)
• Semimonthly: Paid twice per month. Not the same as bi-weekly. (24 pay periods per year)
• Monthly: Less freq used. Payroll paid once per month with occasional sem-monthly access to funds for employees. (12 payroll cycles).

Prepare Required Employee Documentation 

Employees vs Independent Contractors

Definition of employee:

• Employer directs worker’s performance
• Provides primary tools to complete assigned work
• Material contribution = The work employee completes involves effort 
• Employer provides benefits
• Employer includes worker on gov reports
• Employer withholds payroll taxes

Definition of Independent Contractor:

• Employer does not direct the worker’s specific actions
• Employer does not provide tools to complete work
• Independent Contractor is responsible for their own payroll taxes
• Do not receive OT

Statutory employees
Norm classified as an independent contractor, if specific situations are at hand they need to be included as an employee and not an independent contractor. Here is a summary of this.

• (Statutory employee rule) Certain driver positions are not eligible to be an independent contractor
• (Statutory employee rule) FT life insurance agents
  
• (Statutory employee rule) some at home workers that develop materials at home then return them to the employer
• (Statutory employee rule) FT traveling salesperson who works on a single company's behalf (other rules apply) 
  
• Other situations applicable per the IRS current regulations

The IRS uses three common tests to clarify if a worker is an employee or an Independent Contractor.  

• 1) Behavioral control: the extent that the employer has the right to control and direct worker actions
  
• 2) Financial Control: guidelines on how a worker is paid (reimbursements, tools, payments)
  
• 3) Relationship of the parties: work-related contract info between the employer and the worker; benefits, how long this is expected to last, and the business operations summary.
  

IRS

• Firm/employer may request info from IRS on how to file
• Info can be found in IRS publication 1779
• Definition of Independent Contractor: = IRS Form SS-8
  
• Form W-4 file each January

Reporting new employees to the IRS

• Why is reporting imperative? immigration, registry monitoring, court- ordered applications, ethical violations, COBRA & child support
• Minimum doc allowed is: W2 and I-9 Forms 
• W2: helps employers determine the correct amount of federal income taxes to withhold from the employee’s payroll
• I-9: eligibility to work on the US and all new hires be reported within 3 days of their start date 
• Employer/payroll accountant must maintain W4 and I9 in permanent employee file
  

Reporting new employees to the State Offices

• Immigration Reform and Control Act mandates that employers notify state offices within 20 days of an employee’s start date 
• Fines for not reporting new employees: $25 per unreported employee & $500 for intentional nonreporting 
• Reporting new hires is complex/a lot of room for errors
• Office of Management and Budget (OMB) has a multi-state form to help (OMB Control No 0970-0166)

Foriegn workers

• Hiring foreign workers has additional challenges
• I-9, sometimes additional paperwork is needed
• Visa is needed or other immigration paperwork
• Employer will be fined if the correct paperwork is not submitted ($500 - $5,000)
• Employer must file IRS form 1042

Differentiations Between Exempt and Nonexempt Workers 

• Nonexempt and exempt details are mained in payroll records
• Diff types of workers can be either exempt or nonexempt
• Exempt worker = Highly skilled workers (managers/salaried workers etc
• Nonexempt worker =
  
• US DOL = issues guidelines for exempt/nonexempt employee guidelines

Exempt workers

• Generally salaried employees (do not receive OT for work over 40-hours)
• Not all salaried employees are classified as exmept
• Exempt from FLSA provisions
• Not subject to the FLSA wage and hour provisions
• To be marked as exempt, employee must meet all of the "Executive Exemption" requirements (salary, work type, knowledge)

Nonexempt workers

• Receive OT pay for work over 40-hours
• Wage and hour laws pertain to  
• To be exempt, must meet the following guidelines

Leased and Temp Employees

• Temp employee = employee of an employment agency
• Leased employee = leased from recipient company, FT work, directed by the recipient company
• IRS code 414 has guidelines on the diff between an employee and a leased employees
• No more than 20% of a company's employees may be leased/temps
• Tax cuts: PEO (Proff Employer Org)= deductions may apply via sections 199A (temp or PT)

Pay records and employee file maintenance

• Payroll private personal records are the responsibility of the company's chosen payroll dept
• Most important part of a payroll dept is the maintenance dept
• Physical records of pay advice, time off, tardiness and OT
• Digital record keeping recommended 
• Pay records = payroll freq, income tax schedules (IRS Pub 15-T)
• Internal controls are critical in insure the payroll system (time records are confidential)
• Strategics payroll system design should be completed prior to setting up payroll
• Set up scheduled payroll SOP review times
• File maintenance = Per the Int. Rev. Code record labeling and backup copies are required
• Maintenance procedures are regulated by the IRS Proc. 98-25
• FLSA = has min 3-year and 2 year record retainment standards
• Electronic records = record and safeguarding procedures

Pay rates

• Pay rate = Min wage rates + other wages
• Living wage calculator = http://livingwage.mit.edu 
• OT rates are calculated by FLSA (CA OT is 8+ hours per day)
• Commissions = receiving a % of sales
• Piece rate compensation = connects employee compensation with the sale of a good or service that they prepared via work. CA has specific guidelines relating to piece rate time regarding back pay.

How an employee enters their workweek hours

• Web based applications (TimeStation, ClockShark, TImeDock) IPs and GPS locations
• Companies will need to set up with a precise way to track employee hours
• Time cards must be verified for accuracy by someone that knows the company's needs and the employee's sched (underpayment/overpayment issues)
• OT approval 

Employee termination and documentation Procedures

• Keep records
• When an employee leaves a company the payroll dept needs to accomplish a few tasks related to the company's policies
• This includes the final paycheck with vacation or sick time and benefit info
• Severance packages are generally not-mandated (states have more info on this)
• DOL has guidelines on dates and procedures (CA w/i 72 hrs)
• Paper doc destruction  = incineration or shredding
• Digital doc destruction (electronic accounting records) = follow cyber security procedures (DoD 5220.22-M
  
• Separate employee documentation into three separate privacy paper files for privacy requirements )private personal, Empl benefits, Investigative legal)

Other important payroll considerations

• Know your local and federal laws regarding OT pay, sick pay
• Prior approval for Leave of absence & time off (Keep a paper trail of requests for tracking)
• File security = all payroll files must be kept secure
• Regulation E = Electronic Funds Transfer Act, regulates paycard related fees & other paycard related info
• Payroll as a non-solo record/have multiple eyes on the payroll procedures and dept
• Sep of duties also applies to payroll accounting
• Data breach issues = ACT QUICKLY (fol the taxadmin.org procedures)
• If an employee is terminated (keep records for a min of 3 years), 6 years for empl benefits, 4 years for W4s and local tax, 3-5 years for payroll
• Even if a company outsources their payroll the company is still responsible for accurate reporting and payroll procedures

Summary

1. Plan your payroll procedures wisely
2. Plan with growth in mind
3. Plan with payroll record security parameter safeguarding
4. Plan based on your company's own limitations and strengths
5. Consider record keeping and maintenance requirements (retention and destruction)
6. Payroll is only as accurate as the info provided